The development of Eldorado Gold's mining projects in Greece have been exercises in misery.
In 2012, the Skouries mining site in northern Greece, the centrepiece of the Canadian company's European gold portfolio, was besieged by protesters who said the mine would be an environmental disaster. A year later, the site was firebombed. In mid-2015, the new, far-left Syriza government revoked the permits that Eldorado needed to put Skouries into production and the project was suspended.
Today, after striking peace agreements with the Syriza government, Eldorado is sinking more than $1-billion (U.S.) into three projects in Greece, dominated by Skouries, that will drive the company's growth in the next decade. Propelled by the Greek mines, Eldorado expects to produce more than 800,000 ounces of gold in 2020, up 110 per cent from forecast production in 2017.
"We've been through a very tiring, energy-sapping period in our history," Paul Wright, Eldorado's president and chief executive officer, said Tuesday from its Greek office in central Athens. "But now the majority of the permitting process is behind us. The government, we now believe, recognizes the necessity for job creation and growth in Greece and these projects help achieve that goal."
The expansion of the Greek mines, which employ about 2,000 workers, makes Eldorado one of the biggest foreign investors in Greece, perhaps the biggest. The only recent investment that comes close is China COSCO Holdings's investment in the port of Piraeus, just outside Athens, that is valued at more than €500-million ($713-million) over the next five years.
Eldorado's projects are located in the Halkidiki mining area, near the birthplace of Aristotle, which has produced gold silver, copper, lead and zinc on and off since the time of Philip of Macedon, father of Alexander the Great. In the 1980s, the mines, collectively known as Hellas Gold, fell on hard times after its then owner was killed by the infamous November 17 terrorist group.
Since then, Hellas Gold endured a series of owners, among them the Greek government, TVX Gold and Kinross Gold, both of Canada, and Britain's European Goldfields, all of which were stymied by the environmental risks posed by large-scale industrialization of an ecologically delicate area. In 2003, Kinross actually abandoned the mines.
Eldorado entered Greece through the purchase of European Goldfields for $2.4-billion in late 2011, just before gold prices sank, sending gold shares spiralling downward. Eldorado went from about $16 (Canadian) to around $3.65 – where it was trading on Tuesday – giving it a market value of only $2.7-billion.
Shortly thereafter, something akin to a civil war broke out near the mines as environmentalists and other protesters clashed with police. The Syriza party's election in 2015 nearly ended Eldorado's will to keep up a development program in Greece. Early this year, after the government permits were revoked, the company suspended operations at Skouries for about four months. "We had reached the point were where we were no longer prepared to advance the project, " said Mr. Wright, who is 62 and has been Eldorado's CEO since 1999.
Eldorado fought back, winning 16 court decisions related to the permits. A recent cabinet reshuffle, which installed ministers who were more favourable to mining projects, pretty much ended Eldorado's war with the Syriza government.
Finishing the first development phase at Skouries, which will have open pit and underground operations, will cost $540-million (U.S.), taking the total cost to $710-million. The second phase, between 2028 and 2042, will cost another $460-million. Production is to begin in 2019 and will see 3.1 million ounces of gold, plus vast amounts of copper, produced through the mine's lifetime.
Two far smaller expansion projects, at the nearby Olympias mine where the mill is being rebuilt, and Stratoni, an underground lead, zinc and silver mine, will see $125-million in spending over the next two years. The Greek investments come shortly after the sale of Eldorado's mining projects in China, leaving the company focused on mines in Greece, Turkey and Brazil.
Mr. Wright says Eldorado is not contemplating any mergers or acquisitions and will concentrate on organic growth, with Greece leading the way. "We're done with M&A," he said "We have our assets to develop."
Eric Reguly